Celsius CEO Alex Mashinsky "took control" of the firm’s trading strategy in January on a hunch that the US Federal Reserve would raise interest rates, according to a report by the Financial Times.
Mashinsky was convinced that a hawkish Fed decision would send already falling crypto prices lower, according to the report on Tuesday. According to the report, the CEO also created tension among some staff as he repeatedly clashed with the firm’s former chief investment officer (CIO) Frank van Etten, who left in February per his LinkedIn.
During a call on January 21, the Friday before a Fed meeting, Mashinsky told the investment team that the coming week would be the most defining one of their careers. A person familiar with the events told the FT that Mashinsky had a strong conviction about how bad the market could get and “wanted us to start cutting risk however Celsius could.”
The Fed signaled rate hikes in January but didn’t increase interest rates until March. Bitcoin rallied following the meeting and crypto prices didn’t crash until May.
One source told the FT that Mashinsky ordered the traders to "massively trade the book using bad information," while another said that “he was slugging around huge chunks of bitcoin.” According to the report, in one instance Mashinsky ordered the sale of “hundreds of millions of dollars worth of bitcoin” without consulting the company’s information on its own holdings. This bitcoin was bought back at a loss a day later.
Another source, however, told the FT that while Mashinsky was vocal about his views, "he wasn’t running the trading desk."
According to the report, Mashinsky blocked the sale of the firm’s GBTC holdings, which were trading at a 15% discount to net asset value and worth around $400 million at the time. Celsius had bought GBTC when it was trading at a premium relative to the underlying bitcoin. Mashinsky opposed the sale, arguing that the discount might narrow. The discount is currently just over 31% after going as low as 34% in June.
Celsius eventually unwound its GBTC position when the discount was 25% in April, taking the firm’s total losses on its GBTC trade to somewhere between $100 to $125 million, according to the FT.
The lending platform attempted to stem its losses by borrowing from other crypto firms, pledging tokens it held as security for loans of stablecoins in the process, leaving Celsius vulnerable to crypto price movements.
Celsius is running out of cash fast, according to recent court documents. Projections from the law firm Kirkland & Ellis filed on Sunday show the lender could run out of funds by October. The firm also owes depositors $2.8 billion more in crypto than it currently holds.
At the time of press Celsius has not responded to a request for comment from The Block. Nor has Frank van Etten.
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